Consumer

Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

Neiman Marcus is having flashbacks of the last recession. Sales are falling, clothes are piling up, and the company is pruning orders for the fall. Hope of an upcoming IPO -- for which it filed plans last August -- has dimmed.

CEO Karen Katz didn't come out and use the "R" word during the company's earnings call this week to describe the economic environment. But she did mention putting the recession playbook to use, saying it would take the better part of a year to work through all Neiman Marcus' extra inventory.

The culprit this time around is an epic oil and gas price slump. A fifth of Neiman Marcus stores are located in the oil-producing state of Texas, with shoppers whose wealth is tied to the business, and Katz said energy-price declines are causing customers to cut spending. Low gasoline prices, which can sometimes help boost the spending of lower-end consumers, don't do much to pad the pockets of big spenders buying $24,000 Gucci handbags.

This week Neiman Marcus said sales at established stores fell by 2.4 percent from the year before, following a 5.4 percent first-quarter drop -- the first same-store sales decline since 2010. Back in 2008, the plunging stock market and cratering housing market spooked Neiman's wealthy customers, prompting seven straight quarters of negative comparable sales for the luxury retailer.

Discount Rack
Year Over Year Change In Neiman Marcus Sales At Established Stores
Source: Company filings

I'm typically loath to let executives use the weather or other external factors as a scapegoat. And Neiman Marcus certainly has its share of internally-caused problems (high levels of distressed debt, intensified competition, etc.). But a look at the latest sales tax collections from the Texas State Comptroller shows Neiman Marcus isn't alone when it comes to the economic pain the oil and gas bust is causing.

After years of sustained growth, the money Texas collects from retailers to fund its coffers has dropped for five straight months.

Closing Time
Year-over-year change in Texas state sales tax collections
Source: Texas Comptroller of Public Accounts
Does not include tax collections from cars, alchohol, tobacco, hotel utilities

Meanwhile, consumer-facing companies from Garmin and Blue Nile to Pepsi and Kona Grill are feeling the sting.

Stage Stores, which operates 850 department stores in 40 states, likened its performance to"a tale of two cities" at an investor conference this week. Sales at established stores located in the oil patch are down 4 percent from the year before, but are up by 0.5 percent throughout the rest of the chain. In towns where "rig counts went down basically to zero, we've seen some customers who left town," CFO Oded Shein said. Stage executives also mentioned customers living on royalties from companies that had found oil on their land. That extra income has vanished. 

Intercontinental, 14 percent of whose U.S. hotel rooms are in oil-producing states, said revenue per available room in those markets fell by 10 percent in the fourth quarter from the year before, compared to 5 percent year-over-year growth for the rest of its properties. 

Brinker International hopes the dislocation will actually help Chili's restaurants; executives said on a recent earnings call the chain is "deeply penetrated in areas like Texas and Louisiana [that] are dealing with economic pressures linked to declining oil prices," forcing competitors to flee while it stays put and waits for a rebound. 

Already, the spring has brought an oil rally: Oil prices have risen by 15 percent in the past three months, with the price of Nymex crude oil rising above $40 a barrel on Thursday for the first time since December. Meanwhile, Neiman Marcus' bond prices, which had sunk below 66 cents in January, rose to 83 cents Thursday. 

Recovery Run?
Neiman Marcus bonds are gaining steam
Source: Bloomberg

But as my colleague Liam Denning has pointed out, this year's spring rally in oil looks a lot like last year's, which eventually succumbed to a persistent glut in inventories. That glut is bigger today, leaving oil prices vulnerable to another setback. Natural gas prices, meanwhile, remain flat on their back. With Neiman Marcus' fortunes tied so closely to the oil markets, it could face even more pain ahead.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at sbanjo@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net